Matviyenko hopes legislation for de-offshorisation will be drafted this year

MOSCOW, February 24, 21:43 /ITAR-TASS/. ass) - Valentina Matviyenko, Chairperson of the Federation Council, upper house of Russian parliament, said she was hopeful that legislation for de-offshorisation of the Russian economy would be ready this year, but thinks that companies will need a transitional period to adapt to new rules.

She recalled that this issue had been raised by President Vladimir Putin in his Address to the Federal Assembly (national parliament) in December 2013. As of now, “42 percent of our foreign trade turnover, and that’s over 10 trillion roubles, go though offshore companies… and we cannot put up with this of course. We must change the situation,” Matviyenko said, adding that this could be done only by amending legislation.

The Federation Council and the State Duma, lower house of parliament, have each set up a working group, which are drafting five bills amending the Criminal, Tax and Budget Codes. “Believe me, we are working on this problem very seriously, just as the government, the Ministry of Finance and the Ministry of Economics are. I believe we will create a legislative framework this year so that we could put these activities on a civilised basis,” Matviyenko said.

She stressed the need to “take a balanced approach and make such taxation rules for offshore companies that would encourage them to move into Russian jurisdiction… Information about the ultimate beneficiaries of offshore companies should be disclosed, countries should exchange information and many other steps should be taken.”

At the same time, Matviyenko believes that de-offshorisation will require “some sort of amnesty or rather some transitional period so that all companies could adapt to the new legislation and carry out necessary legal procedures to comply with the laws to be adopted in Russia.”

“There should be a dialogue with the business community, a call for patriotism, especially to large national companies. I do not admit of a situation where our state-owned corporations would carry out operations in offshore jurisdictions through their subsidiaries,” Matviyenko said, adding that “this must be ruled out completely.”

“So we are working, and I am confident that our work will prove successful,” she said.

Russian MPs will discuss de-offshorisation laws on a priority basis during their spring session, Matviyenko said earlier.

She stressed the need for effective measures to de-offshorise the economy. “Many experts say that more than one trillion U.S. dollars were taken to offshore zones over the past 20 years,” she said, adding that “this is a sphere that is very hard to regulate at the state level.”

“There are several dozen schemes of tax, investment and corporate optimisation in offshore zones. This is a whole world where one can easily hide his income and evade fair taxation,” Matviyenko said.

The Federation Council, the upper house of Russian parliament, intends to discuss de-offshorisation laws during the spring session. “Such proposals have been prepared, we corrected them taking into account the proposals put forth by the president in his Address and we will continue working on this priority topic together with the State Duma,” she said.

Matviyenko expressed confidence that the parliament would adopt a set of documents during its spring session that would improve the economic situation in the country, including by means of so-called de-offshorisation, thus increasing federal and regional budget revenues,” she said.

Russia will get tens of billions of roubles from de-offshorisation of its economy, Finance Minister Anton Siluanov said.

“I think we can talk about tens of billions of roubles,” he said.

The minister noted that a set of measures was being prepared, covering three areas. First, companies will have to pay taxes in Russia if they run their operations in the country.

Second, access to government contracts and subsidies should be limited for companies that do not disclose their beneficiaries. “It is an absolutely correct decision that companies should disclose their owners so that we knew where they are registered and pay taxes,” the minister said.

Third, controlled foreign companies that do not pay dividends to their Russian parent companies and thus make it impossible to tax these amounts.

“If such a company does not carry out its activities and does not pay dividends to the parent company, we should naturally hold such a company accountable and compute taxes depending on the activities controlled by the foreign company,” Siluanov said.

The Finance Ministry is drafting legislative initiatives to de-offshorise the economy and hopes that relevant initiatives will be submitted to the State Duma, lower house of parliament, in the first half of 2014.

In his annual Address to the Federal Assembly on December 12, 2013, President Putin said de-offshorisation of the economy should become a key task next year.

“Incomes received in offshore zones should be taxed by our rules, and tax payments should go to the Russian budget. We have to think about how to take this money,” the president said.

Companies registered in offshore zones will not be entitled to state support, including loans from Vnesheconombank, and government contracts. “In other words, if you want to earn money in Russia, register here,” he said.